Data Growth, Cloud Adoption Propel EMC's Q4, Full-Year Earnings12:08 PM EST Tue. Jan. 25, 2011
EMC rode a swelling tide of storage growth and increased customer migration to cloud computing resulting in record quarterly and full-year revenue and profit during its fourth quarter of 2010.
Strong growth in its high-end and mid-tier storage products, combined with increased sales and profit from VMware and RSA, were among the key contributors to a quarter and a year which the company said paves the way for improvements in 2011 and beyond.
EMC on Tuesday reported that revenue for its fourth quarter of 2010, which ended December 31, reached $4.9 billion, up 19 percent compared to the fourth quarter of 2009. The company also reported a profit of $628.6 million, or 29 cents per share, up 53 percent compared to the $390.6 million, or 19 cents per share, it reported last year.
For all of 2010, EMC reported revenue of $17 billion, up 21 percent compared to last year's $14 billion. The company also said profit for the year reached $1.9 billion, or 88 cents per share, up 66 percent over last year's reported profit of $1.1 billion, or 53 cents per share.
EMC's U.S. revenue reached $2.6 billion in the fourth quarter, up 20 percent over last year. It accounted for about 53 percent of the company's total revenue.
Fourth quarter sales of EMC's high-end Symmetrix storage product portfolio increased 19 percent over last year, while sales of its mid-tier storage portfolio was up 23 percent, EMC said. The company also said that VMware revenue increased 38 percent and that RSA security revenue increased 28 percent over last year. Only its Information Intelligence Group reported a slight decline, about 2 percent, due to customer transitions to new products.
David Goulden, executive vice president and CFO at EMC, called cloud computing one of the key drivers for EMC's growth.
The journey to the cloud continues to advance in phases, Goulden said. The first phase, virtualization, is all about increasing customer efficiency. "On the average, customers have virtualized about 30 percent of their applications," he said.
In the second phase, customers are adopting virtualized applications in their business production environments, followed by Infrastructure-as-a-Service (IaaS).
EMC is an important part of all three phases, Goulden said. "What's important, whether customers are entering the first phase or the third, we have the technology to help them on their way," he said.
Next: Strong Growth For 2011, But Not With Dell
Joe Tucci, EMC chairman and CEO, said he is very pleased with his company's 2010 results.
"In 2010, we positioned ourselves, not only for 2011, but for 2012 and beyond," Tucci said.
The year 2010 saw EMC and the IT industry as a whole exceed original expectations, giving the company the confidence to increase its goals for 2011, Tucci said.
EMC originally expected 2010 IT spending to grow 3.5 percent over 2009, with EMC's total addressable market to grow by between 6 percent and 8 percent, Tucci said.
Instead, he said, the company now believes that IT spending during 2010 actually grew by about 10 percent, and that EMC's total addressable market grew at between 10 percent and 12 percent, helping propel EMC's overall 19 percent revenue growth for the year.
For 2011, Tucci said he expects overall IT spending to grow between 5 percent and 7 percent, with EMC's total addressable market expected to grow between 8 percent and 10 percent, leading the company to expect a 15 percent revenue growth to $19.6 billion for the year.
The company also expects profit for 2011 to be about $2.4 billion, with earnings per share to hit $1.07 for the year.
Part of that growth will be driven by the portfolio of 41 new hardware and software products EMC unveiled last week, including the company's new VNX midrange and VNXe SMB storage appliances, Tucci said.
However, the growth in business will not include contribution from EMC's Dell partnership, which Tucci said, in response to an analyst's question, is falling.
"For sure, our relationship has moved from strategic to tactical," he said. "For sure, our relationship is now competitive."
Tucci said EMC's sales of its Clariion product line through Dell fell during the fourth quarter, which is historically EMC's strongest quarter. This compares to a growth in sales through its other channel partners of 44 percent during the quarter.
However, Tucci said, EMC and Dell have thousands of joint customers, and will work together to continue serving them with EMC products. However, he said, it is "highly unlikely if not impossible" that Dell will sell EMC's new VNXe line.